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Black Monday


Mark Stapleton
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I believe that the stcok market will come back, as it has always done.

I am not defending what the Fed has done, and I wanted to see it let AIG (and probably Fannie and Freddie) fail.

In fact, I view the Fed as a shadow government of potentially dubious Constitutionality (at least when it acts as a de facto government).

Would someone please explain to me what "China Syndrome" means?

I think I know, but I would like to hear one or more explanations.

Thanks.

Chris, I believe the term "China syndrome" was coined after the three mile island incident, when the reactor nearly suffered a core meltdown. One of the engineers was supposed to have said. "You Guys nearly got to see China" or words to that effect. Steve.

Actually the line was from the movie "The China Syndrome" which coincidentally came out around the time of 3 Mile Island. It is used figuratively for other types of meltdown.

There is also ""the Pepsi Syndrome" an SNL sketch in which Garrett Morris (in drag) becomes 30 feet tall after coming into contact with nuclear waste and carries off Jimmy Carter ala King Kong with Merna Loy, but I digress.

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It looks like in the short term at least, the future prosperity of American citizens rests on the value of the dollar. The signs are not good.

http://www.counterpunch.org/lindorff09232008.html

September 23, 2008

What Nobody's Saying

The Bailout Will Kill the Dollar

By DAVE LINDORFF

What nobody in the corporate media is mentioning amid all the blather about the $700-billion Paulson bailout proposal is the impact it will have on the US dollar.

We are told that this huge gift to the financial sector—the assumption, at top dollar, of all the bad debt they’ve piled up--will be at taxpayer expense, but that’s only the half of it. (Really only the quarter of it because since the US government is technically bankrupt already, spending more than it takes in each year, all that money will be borrowed, and will be added to the national debt, meaning that just as the real cost of the $500-billion Iraq War is closer to $2 trillion, the real cost of the $700 billion bailout will be more like $1.5-2.5 trillion.)

But besides the direct bill handed to taxpayers for this gigantic con, there is the fact that adding that much to the national debt is also going to drive the dollar down precipitously against foreign currencies. We’re already seeing that happen, even while they’re just talking about the bailout. The dollar is falling against all major currencies—the Euro, the Yen, the Renminbi and the British pound. And it will continue to fall as the details of the bailout come out.

This will add to already powerful pressures in countries like Saudi Arabia and China, which hold huge quantities of US dollars and US dollar-denominated debt, to shift out of dollars and into other currencies—particularly the Euro and the Yen. Last week, an article in China’s People’s Daily, which like Pravda in the old Soviet Union, is the official voice of the leadership in China, called for just such a move. Russia is also calling for an end to the dollar as the underpinning of the global economy.

For some years now, many economists have been predicting an end to the dollar as the world’s reserve currency, but this latest plan by the US Treasury will push such a shift forward from “some day” to “now.”

As long as the dollar has been the reserve currency—the currency in which key commodities like gold or oil were priced, and the currency that exporting nations stocked in their treasuries as a store of value – it was protected against collapse. But once it loses that status, there will be nothing to prop it up any longer, and it will quickly slide to a value that it deserves. We got an inkling of what is going to happen today, as crude oil prices leapt in the short time it took me to research and write this essay (less than an hour!) by 25%, the biggest jump in the history of the oil market. This timely vindication of my point was purely a move caused by loss of confidence in the dollar. There was no oil supply disruption. In fact, demand for oil has been sinking as the economic crisis grows. Oil producers and traders simply realized that the dollar is going poof, so they radically jacked up the cost of oil in dollars.

If you want to see what where the dollar is headed, look to the currencies of the debtor nations—countries like Mexico or perhaps Mozambique. A nation that makes almost nothing, and that imports most of its needs, cannot have a strong currency.

This might not matter much if we had a functioning domestic economy, where people could find the goods and services they needed without turning to sources from abroad. A big country like the US could simply turn inward and function on by its own domestic economic standards.

I remember back when the former Soviet Union was in a state of economic and political free fall in the early and mid 1990s, the currencies of the constituent countries, like Russia, Ukraine and Belarus had had collapsed to virtual worthlessness on the international market. A Byelorussian friend, an engineering professor from Minsk, living and working near me in China at the time, explained that although when he traveled the world, he felt like a pauper, things weren’t so bad back home Belarus, where he and his family would go in the summer. “My apartment only costs a few dollars a month to rent,” he explained, “and our food is bought on the local market using rubles, so it is very affordable.” The same was true for other needs, like clothing and books for school, he explained. The only problem was buying gas for his Russian Volga. “Gas,” he explained, “is priced as an international commodity, so it takes me one month’s wages in Belarus to buy the gas to drive once to and from our country dacha.”

You can start to see the problem. Since agriculture has been killed off in most of the US, in favor of giant agribusiness enterprises situated in the western part of the country and some parts of the Midwest, most people elsewhere will not have local produce available, and the cost of transporting food from California to places like New York or Pennsylvania will be prohibitive once the dollar collapses, since oil is priced internationally. Meanwhile, goods like TV sets, computers, phones, cars (or at least the key components of cars), clothing, etc., are no longer even made in the US, and will thus be completely unaffordable. As for the service jobs that are supposed to have replaced our old manufacturing sector, no one will be interested in buying what they’re offering, because they’ll be scrimping just to buy the key staples they need to survive, so of course joblessness will soar.

Eventually, of course, entrepreneurially minded people will begin establishing local farms again where they once flourished generations ago, and small factories will be built to provide key essentials, but all this will take time, and will have to cater to a market of people operating at a much lower standard of living.

The banking sector, meanwhile, which is the proximate cause of this monumental disaster, won’t mind any of this, for it will continue operating on the international stage, shifting its focus to lending money (no longer dollars, though), to growing economies in Asia and Latin America and eastern Europe. And this is what, in truth, the “rescue” of Wall Street is all about.

It’s not about saving Main Street, as Paulson claims. Main Street, under the bailout, is toast. It’s about helping the banks and investment banks and insurance companies that brought on this crisis to ride it out in style, their astronomical losses bankrolled or absorbed by the American public, so that they can shift their operations overseas and continue with their rape and pillage of the global economy.

The US will be left behind, a smoking ruin, with Americans, like Weimar Germans before them, going shopping with wheelbarrows full of worthless green paper to exchange for a few days’ groceries.

DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006 and now available in paperback edition). His work is available at www.thiscantbehappening.net

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It looks like there might be trouble with getting the bailout package through the Congress:

http://www.telegraph.co.uk/finance/3073543...al-markets.html

The wording is too loose and the election is only about 40 days off. The consequence of stalling is a lockdown of the finanacial system as credit evaporates. The consequence of its passage will mean homeowners (and the rest of the population) take the pain of the asset writedowns and economic readjustment. Not very palatable either way.

It's times like these, surely a national emergency, that Americans must regret electing a buffoon as President.

Meanwhile, this analyst doesn't like the Greenback's chances, claiming it is backed by bananas:

http://www.presstv.ir/Detail.aspx?id=70069...ctionid=3510302

Finally, it seems that the economic crisis has forced the US to suspend its pernicious foreign policy agenda, at least for now. The members of the European US alliance have now cancelled talks aimed at increasing sanctions on Iran:

http://www.presstv.ir/detail.aspx?id=70404...ionid=351020101

Could be a sign of things to come.

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It looks like there might be trouble with getting the bailout package through the Congress:

http://www.telegraph.co.uk/finance/3073543...al-markets.html

The wording is too loose and the election is only about 40 days off. The consequence of stalling is a lockdown of the finanacial system as credit evaporates. The consequence of its passage will mean homeowners (and the rest of the population) take the pain of the asset writedowns and economic readjustment. Not very palatable either way.

It's times like these, surely a national emergency, that Americans must regret electing a buffoon as President.

Meanwhile, this analyst doesn't like the Greenback's chances, claiming it is backed by bananas:

http://www.presstv.ir/Detail.aspx?id=70069...ctionid=3510302

Finally, it seems that the economic crisis has forced the US to suspend its pernicious foreign policy agenda, at least for now. The members of the European US alliance have now cancelled talks aimed at increasing sanctions on Iran:

http://www.presstv.ir/detail.aspx?id=70404...ionid=351020101

Could be a sign of things to come.

Speaking of a "sign of things to come", they're parading idiot son GW Bush out tonight to address the nation about the financial crash. We're not likely to witness the second coming of FDR.

http://www.msnbc.msn.com/id/26871338

Peter DeFazio on the bailout package. Good stuff

Edited by Terry Mauro
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I agree that the bailout will further tank the dollar.

But I hope that we don't see the second coming of FDR.

The rest of the country doesn't need to subsidize a sector of the economy whose profligate spending drove the sector into the ground.

If we are all going to suffer, let's let the financial sector suffer the most.

FDR may be one of the most misunderstood Presidents. Who do you think broke up the House of Morgan and introduced banking regulation designed to prevent the very kinds of ponzi schemes now imploding? All the FDR regulations were overturned by Wall Street the past 15 years.

FDR never subsidized the bankers, he was their worst nightmare.

Edited by Terry Mauro
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I agree that the bailout will further tank the dollar.

But I hope that we don't see the second coming of FDR.

The rest of the country doesn't need to subsidize a sector of the economy whose profligate spending drove the sector into the ground.

If we are all going to suffer, let's let the financial sector suffer the most.

FDR may be one of the most misunderstood Presidents. Who do you think broke up the House of Morgan and introduced banking regulation designed to prevent the very kinds of ponzi schemes now imploding? All the FDR regulations were overturned by Wall Street the past 15 years.

FDR never subsidized the bankers, he was their worst nightmare.

Y2000- Bankers plan for financial crash-CFR

http://www.larouchepub.com/other/2000/2729_cfr.html

Hank Greenberg of AIG attended this weekend of "game theory". It did not do him much good in the final analysis as his company was taken over.

This was further confirmed by the last session of the conference, at which the featured speaker was Ray Kurzweil, one of the principal proponents of "virtual reality" and author of The Age of Spiritual Machines, When Computers Exceed Human Intelligence. Maurice "Hank" Greenberg, head of the giant American International Group (AIG) insurance firm and vice chairman of the CFR, introduced Kurzweil as "the Thomas Edison of the computer age."

Edited by Terry Mauro
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Here's my take on the situation. Since a war with Iran is apparently not in the offing, the Bush regime needed something else as an excuse to loot what's left in the treasury before someone else takes over. They decided to go for broke, and another terrorist attack wasn't even necessary. They just decided to tell the people, "We need your money, as much as you can spare - 700 billion sound all right? - to give to all of our rich friends who are going to hoard all their money (lending it only to people they know will pay it back), unless they can have yours too." And will the people be stupid enough to buy this? Perhaps not, but even that is beside the point. The people's "representatives" will pass a bill to give the people's money to these interests they really represent, the same ones who own them. And the people will say "vote the bums out," but of course the people in each district will reelect their own favorite rep, so that in sum almost everybody gets reelected. No one gets screwed but the people, and this time in the most spectacular fashion possible. Ain't oligarchy grand?

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Polls apparently indicate that over 90% of Americans oppose this massive bailout of the bankers. Both major candidates for President support it. Could there be a better example of why so many people in this country don't vote? Talk about taxation without representation....

This bailout is the financial equivalent of the Patriot Act. It will certainly add to Bush's ignominious presidential legacy.

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